Central bankers need new mottos. I happen to have a few proposals.
- It takes effort to fail, and we try harder.
- If at first you don’t succeed, repeat what doesn’t work.
- The 1% are our friends, and we hope it shows.
ECB Seriously Considering Negative Interest Rates
Appropriate mottos out of the way, let’s turn our attention to the silly idea of the day: negative interest rates.
Via translation from El Economista, please consider ECB Seriously Considering Negative Interest Rates.
Coeuré Benoit, a member of the European Central Bank government, said today that the ECB is ‘seriously’ considering negative interest rates.
Mario Draghi has repeatedly recognized that there is a debate within the ECB on the pros and cons of negative rates that would seek to force banks to lend.
Forcing capital impaired banks to lend is blatantly stupid. The expected result is higher losses.
As a fundamental matter, it’s actually mathematically impossible to lend excess reserves. For discussion, please see Notes From Steve Keen on “Lending Reserves”
Regardless of the mathematical impossibility, people (even central bankers) want banks to lend their reserves to stave off deflation.
The deflation-fighting idea is also ridiculous as noted in Deflation Theory Reality Check: Why Inflation is Severely Understated; Feel Good Effect
With the above in mind, additional motto suggestions are welcome.
I received a number of interesting mottos from readers. The best one was from Steve who proposes “We don’t care. We don’t have to, because we own you.”
Mike “Mish” Shedlock